A Practical Guide to Cross-Border Structures: Red-Chip, ODI, VIE, and Cayman Incorporation Explained

As more Chinese companies explore global capital markets and overseas expansion, choosing the right outbound structure has become a critical decision. Whether your goal is to go public, secure foreign investment, or expand operations, selecting the correct structure—be it a red-chip model, ODI path, VIE structure, or Cayman/BVI entity—can directly impact compliance, cost, and long-term success.

This article summarizes the most common structuring options for Chinese outbound investment, with practical guidance on their uses and risks.

1️⃣ Red-Chip Structure: Preferred for Overseas IPOs

Use case: Companies planning IPOs in the U.S. or Hong Kong

Typical path:

China OpCo → HK SPV → BVI/Cayman Holding → Offshore IPO or funding

Advantages:

Widely accepted by global capital markets

Allows foreign investors and ESOP plans

Structurally flexible and familiar to underwriters

Key Notes:

Requires ODI filing and outbound FX clearance

Multi-entity layering adds legal and operational complexity

2️⃣ ODI Filing: The Legal Path for Capital Outflow

Use case: Companies needing to legally move capital overseas

Why ODI matters:

Enables legal outbound investment from mainland China

Supports equity contribution and M&A activity abroad

Essential step in setting up red-chip or SPV structures

Challenges:

Requires multi-agency coordination (NDRC, MOFCOM, SAFE)

Early-stage planning is critical to avoid bottlenecks

3️⃣ VIE Structure: Alternative for Restricted Sectors

Use case: Businesses in internet, education, and other sensitive industries

How it works:

Foreign investors control but do not own Chinese OpCo via legal contracts (e.g., service agreements, option agreements)

Pros:

Bypasses direct equity restrictions for foreign capital

Commonly used for U.S.-listed Chinese tech giants

Risks:

Regulatory gray zone under PRC law

Increasingly scrutinized in Hong Kong listing processes

4️⃣ Cayman / BVI Holding Companies: Offshore Vehicles of Choice

Use case: Holding overseas shares of Chinese assets or future IPO entities

Why use them:

Flexible shareholder and capital structures

Easy entry for foreign investors

Preferred by global VC/PE funds and underwriters

How to choose:

Cayman is ideal for IPO-focused structures

BVI suits early-stage planning and M&A vehicles

✅ Summary Table: Which Structure Fits Your Goals?

Objective Recommended Structure

U.S./HK IPO Red-Chip + ODI + Cayman

Small-scale outbound setup HK or BVI + ODI

Sensitive sector (e.g. Internet) VIE + offshore control

Seeking foreign investment BVI or Cayman + domestic support

🤝 How We Can Help

We do not provide legal opinions. Instead, we focus on executing China-side structuring and outbound setup efficiently and compliantly, including:

✔ Designing red-chip structures and ODI filing paths

✔ Supporting capital outflow and FX compliance

✔ Registering offshore entities and coordinating bank account opening

✔ Bridging communication with law firms, auditors, and underwriters

For a custom structuring consultation, feel free to [Contact Us] and we’ll help you map your outbound journey.